SCHEDULE 1

Part 1
-
Amendments concerning child-related payments

Outline

These amendments to the VEA will provide for
the continued indexation of the “saved” child-related
payments being received by a small number of persons in receipt of
a service pension or income support supplement.

Date of Effect

1 July
2000

Financial
Impact

No financial impact.

Part 2 -
Amendments
concerning the commutation of income streams

Outline

These
amendments to the VEA will prevent the misuse of the commutation
provisions relating to income streams.

Date of Effect

Royal Assent

Financial
Impact

Negligible

Part 3 -
Amendments
concerning the accrual of certain pension bonuses

unclaimed under social security
law

Outline

These amendments to the VEA will ensure
that, in certain cases, periods of membership of the pension bonus
scheme that would have accrued under social security law will
contribute towards the calculation of a pension bonus payable under
the VEA.

Date of Effect

Royal Assent

Financial
Impact

Negligible

Part 4 -
Amendments
concerning the calculation of pension bonuses

Outline

A number of amendments are required as a
result of the amendments in Part 3. At the same time, a
number of other technical amendments are being made to ensure that
the bonus paid to a person accurately reflects the pension they
were deferring and their marital status throughout the period they
were accruing the bonus.

Date of Effect

Royal
Assent

Financial
Impact

Negligible

Part 5 -
Amendments
concerning the backdating of claims for partner

service pension in certain
circumstances

Outline

These amendments to the VEA will allow, in
specified circumstances, a claim for partner service pension to be
granted from a date earlier than the date the claim was lodged.

Date of Effect

Royal Assent

Financial
Impact

Negligible

Part 6 -
Amendments
to achieve alignment with social security law

concerning the treatment of
compensation payable in lump sums

Outline

These
amendments to the VEA will align the compensation recovery
provisions applicable to multiple lump sums of compensation with
those that apply under the Social Security Act
1991 .

Date of Effect

Royal Assent

Financial Impact

Negligible

Clauses

Short Title

Clause
1 sets out how the Act is
to be cited.

Commencement

Clause 2 sets out various commencement dates of the provisions in
the Act.

Schedule(s)

Clause 3 provides that the Act specified in a Schedule to this Act
is amended as set out in the items of that Schedule.

SCHEDULE 1 - AMENDMENT OF THE VETERANS’
ENTITLEMENTS ACT 1986

Part 1 -
Amendments
concerning child-related payments

Overview

These amendments to the VEA will provide for
the continued indexation of the “saved” child-related
payments being received by a small number of persons in receipt of
a service pension or income support supplement.

Background

Until 1
January 1998 all child-related payments to eligible persons
receiving a service pension or income support supplement under the
VEA were payable under the then relevant provisions of the
VEA. The child-related payment was a component of the service
pension or income support supplement and was the equivalent of the
family payment, guardian allowance and rent assistance payments
that were payable under the Social Security Act
1991 .

The
amendments made by the Veterans’ Affairs Legislation
Amendment (Budget and Simplification Measures) Act 1997 removed
the provisions relating to the child related payments from the VEA
and transferred responsibility for the payments to the equivalent
provisions of the Social Security Act 1991 (SSA).

The
amending act included a savings provision that preserved the
inclusion of the child-related payments in the service pension or
income support supplement for a small number of families who would
have been financially disadvantaged by a transfer to the
SSA.

The
amendments also saved the indexation provisions applicable to the
child-related payments so that the rates of the saved child-related
payments would continue to be indexed in line with increases in the
equivalent payment types under the SSA.

The savings
provisions also imposed a test of continued eligibility for the
saved child-related payments. The test provides that a
person’s service pension or income support supplement will
only include the saved child-related amount until that amount
ceases to be greater than the above the minimum family allowance
child-related payment that would be payable under the
SSA.

The application
of the test means that the saved child-related payments are payable
only until that point is reached and from that time on the payments
are to be made under the family assistance provisions of the
SSA.

The
responsibility for the family payments now referred to as the
Family Tax Benefit (FTB) was subsequently transferred to the Family
Assistance Office from 1 July 2000. The new system of
payments is an amalgamation of a number of payments and rebates
that were previously payable and was set out in the A New Tax
System (Family Assistance) Act 1999 (FAA). The provisions
relating to family payments were repealed by amendments to the SSA
made by the A New Tax System (Family Assistance) (Consequential
and Related Measures) Act (No. 1) 1999 .

The repeal of
the those provisions has meant that the references to the SSA
family payments in the saved VEA indexation provisions are obsolete
with the effect that the rate of the saved child-related payments
has been frozen at the rate payable at the time of the repealed
provisions.

The other
effect of the introduction of the Family Tax Benefit and the repeal
of the relevant SSA provisions is that it is no longer possible to
impose the test for continued eligibility for the saved
child-related payments. This is because there are no directly
equivalent payment types in the FAA that can be used as a
reference.

Explanation of the Changes

The amendments
to the VEA will provide for the continued indexation of the saved
child-related payments in line with increases in the rate of Family
Tax Benefit resulting from indexation.

The amendments
will also remove those provisions relating to the eligibility for
continuation of the saved child-related payments that were based on
the now obsolete family payment provisions of the SSA.

The amendments
will also provide that a person eligible for the saved
child-related payments may opt out of receiving them if they elect
to receive payments of Family Tax Benefit under the FAA.

Explanation of the Items

Item 1 repeals subclauses 10(2) and
(3) of Schedule 5 and substitutes new subclauses 10(2), (2A) and
(3). Clause 10 of Schedule 5 preserved the inclusion of
child-related payments in the service pension or income support
supplement of all those pensioners or recipients who would have
been disadvantaged by the transfer of the responsibility for all
child-related payments to the Social Security Act 1991
(SSA).

Repealed subclause 10(2) had provided that a
person’s pension or supplement would include the
child-related payment until it ceased to be greater than the above
the minimum family payment under the SSA.

Repealed subclause 10(3) had provided that
if the saved status of the child-related payment was lost it could
not later be regained.

New subclause 10(2) provides that subject to
the operation of new subclause 10(2A) the rate of service pension
or income support supplement payable to a person will include the
saved child-related payment.

New subclause 10(2A) provides that a
person’s pension or supplement will include the saved
child-related payment until:

·
for payments made before 1 July 2000, the saved child-related
payment ceases to be greater than the above the minimum family
payment under the SSA; or

·
for payments made on or after 1 July 2000, the person elects by
providing written notice to the Secretary that they no longer wish
to receive the saved child-related payment.

New subclause 10(3) provides that if at any
time before 1 July 2000, the saved status of the child-related
payment was lost it could not later be regained.

Item 2 amends the subclause 10(4)
definition of notional family allowance child-related
amount by inserting a reference to the rate of the payment
before “1 July 2000”.

The notional family allowance
child-related amount is defined as being the amount by
which the rate of family allowance exceeds the minimum rate of
family allowance payable under the SSA.

The definition of notional pension/
supplement child-related amount provides a definition for
the saved child-related payment. The notional pension/
supplement child-related amount is defined as being the
total of the pension supplement child-related amounts that would
have been included in the rate of service pension or income support
supplement payable to a person in respect of any child or children
if the amendments made by Schedule 1 to the Veterans’
Affairs Legislation Amendment (Budget and Simplification Measures)
Act 1997 had not been made.

Paragraph (a) of the amended definition
retains the existing definition for those saved child-related
payments made prior to 1 July 2000.

Paragraph (b) provides that the amount of
any child-related payments made from the 1 July 2000 will be
determined by the Commission in a disallowable instrument that
refers to the indexation of the Part A rate of family tax benefit
under the A New Tax system (Family Assistance) Act 1999 .

Commencement

Clause 2 provides that items 1 to 3 of
Schedule 1 commence on Royal Assent.

Part 2 -
Amendments
concerning the commutation of income streams

Overview

These
amendments to the VEA will prevent the misuse of the commutation
provisions relating to income streams.

Background

A
number of changes were made to the means testing of income streams
by amendments to the Veterans’ Entitlements Act 1986
(VEA) contained in the Social Security and Veterans’
Affairs Legislation Amendment (Budget and Other Measures) Act
1997 .

A
complete definition of the term income stream is
found in subsection 5J(1) but it basically applies to
superannuation, roll over annuities, ordinary annuities, allocated
pensions and allocated annuities.

Subsequent to the 1997 amendments it became apparent that
further amendments were necessary because of the development of new
products and the need to clarify some areas of the
legislation.

Those
amendments were made by the Veterans’ Affairs Legislation
Amendment (Further Budget 2000 and Other Measures) Act
2002 . The amendments were also intended to streamline the
operation of the income streams rules and to limit the abuse of the
rules applicable to asset-test exempt income streams. Similar
amendments had been made to the Social Security law in the
Family and Community Services Legislation (Simplification and
Other Measures) Bill 2001 .

The
amendments included the insertion of new provisions restricting the
reasons for which an asset-test exempt income stream could be
commuted and still retain its asset-test exempt status. These
amendments were intended to prevent the misuse of the existing
commutation provisions.

The
commutation provisions allow for the commutation of an income
stream in the circumstances where the payment resulting from the
commutation is used to purchase another income stream.

Section
52ZMA was inserted by the most recent amendments to provide for the
calculation of the debt that arises from the overpayment of a
service pension or income support supplement while a person is in
receipt of an income stream. The overpayment arises where
there has been the commutation of an asset-test exempt income
stream that contravenes the provisions of the contract or the
governing rules under which the income stream was provided, that
would allow for the commutation.

Subsection 52ZMA(2) provides that
the debt will be an amount equal to the difference between the
amount of service pension or income support supplement that was
paid to the person during the relevant period and the
amount that would have been paid had the income stream not been
asset-test exempt for that period.

Subsection 52ZMA(3) provides that the relevant
period will be the later period beginning
either:

· 5 years before the income
stream was commuted; or

· the commencement day of the
income stream; or

· the period commencing 20
September 2001.

Advice
has been provided by the Department of Family and Community
Services that both section 52ZMA and the SSA equivalent are
ineffective in particular circumstances in preventing the misuse of
the commutation provisions.

The
scenario put forward is that a pensioner has an asset-test exempt
income stream that he or she has held for a period of four
years. The pensioner commutes the income stream and transfers
part or all of the proceeds to another asset-test exempt income
stream as is allowed under the existing commutation
provisions.

The pensioner subsequently
commutes the income stream within a short period of the
commencement of the new income stream and the commutation is not in
accordance with the current commutation rules. Under the
existing provisions of section 52ZMA the recoverable amount will be
the overpayment of pension for the short period for which the new
income stream has been payable.

Explanation of the Changes

These
amendments to the VEA are to provide for a determination that an
asset-test exempt income stream has an earlier commencement
day. The earlier commencement day will enable the
determination of the overpayment of pension benefits in cases where
there has been a misuse of the commutation provisions.

The amendments
are applicable in those cases where a person has commuted an
asset-test exempt income stream in certain circumstances that are
outside the criteria that would allow the income stream to retain
its asset-test exempt status.

The amendments
to section 52ZMA have the effect of removing the asset-test exempt
status of the previous income stream or of a succession of income
streams. The asset test would then apply for any part of that
period in which the person was eligible for a service pension or
income support supplement.

Explanation of the Items

Item 4 repeals and substitutes
subsection 52ZMA(3). Subsection 52ZMA(3) defines for the
purposes of subsection 52ZMA(2) the relevant period
being the period for which the overpayment of service pension or
income support supplement is to be determined.

New subsection 52ZMA(3) defines the
relevant period for the purposes of subsection
52ZMA(2) as the latest of the periods that began:

·
the day 5 years before the day on which the income stream was
commuted; or

·
the commencement day of the income stream; or

·
20 September 2001; and

ending when the income stream was
commuted.

Item 5 repeals subsection 52ZMA(5)
and substitutes subsections 52ZMA(5), (6), (7), (8), (9), (10) and
(11). Subsection 52ZMA(5) currently provides that section
52ZMA is not applicable to income streams to which a determination
under subsection 5JA(5) or 5JB(4) is in force.

New subsection 52ZMA(5) is applicable in the
circumstances where an asset-test exempt income stream has been
commuted and part of the proceeds have been used to purchase
another asset-test exempt income stream.

The new income stream will be regarded as
having the same commencement day as either the old income stream or
the first of a succession of asset-test exempt income streams.

Income stream payments made under the old
income stream or under any of the income streams in the succession
of income streams will be regarded as having been made under the
new income stream.

New subsection 52ZMA(6) provides that
subsection 52ZMA(5) will not be applicable where the amount used in
the purchase of the new income stream represents the balance of a
commutation used for the payment of either a hardship
amount or a superannuation contributions surcharge
liability.

New subsection 52ZMA(7) is applicable in the
circumstances where the whole of an asset-test exempt income stream
is commuted and no part of the proceeds is used to purchase another
asset-test exempt income stream.

The commuted income stream will be regarded
as having the same commencement day as first of a succession of
asset-test exempt income streams.

Income stream payments made under any of the
income streams in the succession of income streams will be regarded
as having been made under the commuted income stream.

New subsection 52ZMA(8) provides that
subsection 52ZMA(7) will not be applicable where the whole of the
payment resulting from the commutation of the old income stream is
used for either the payment of a hardship amount or a
superannuation contributions surcharge liability.

New subsection 52ZMA(9) defines in paragraph
(a), a succession of asset-test exempt income streams as comprising
2 or more asset-test exempt income streams which (other than the
first to be provided) have been funded by means of the payment, or
part of the payment, resulting from the commutation of another of
the succession of income streams.

Paragraph 52ZMA(9)(b) defines an income
stream as the first income stream in a succession of income streams
if it is the first income stream to be provided.

Subsection 52ZMA(10) refers to subsection
5JA(7) for the definition of hardship amount .

Subsection 52ZMA(11) provides that section
52ZMA is not applicable to income streams to which a determination
under subsection 5JA(5) or 5JB(4) is in force.

Commencement

Clause 2 provides that items 4 and 5 of
Schedule 1 commence on Royal Assent.

Part 3 - Amendments concerning accrual of certain pension
bonuses unclaimed under social security law

Overview

These
amendments to the VEA will ensure that, in certain cases, periods
of membership of the pension bonus scheme that would have accrued
under social security law will contribute towards the calculation
of a pension bonus payable under the VEA.

Background

Under
the VEA, the pension bonus scheme enables a person who is eligible
for an age service pension, partner service pension or income
support supplement to receive a lump sum ‘pension
bonus’ if they defer claiming the pension. A similar
scheme operates under the social security law in relation to age
pension. Part IIIAB of the VEA contains the provisions for
the pension bonus scheme.

An
anomaly arises in relation to a person who has deferred an age
pension under social security law but who subsequently becomes a
war widow/war widower-pensioner. Under subsection 47(3)
of the Social Security Act 1991 (SSA), a war widow/war
widower-pensioner is no longer qualified for age pension and
would therefore lose any bonus period/s or part thereof that they
had accrued as a result of deferring age pension under social
security law.

To be
eligible for income support supplement a person must be a war widow
or war widower. So for the period between the person’s
registration for age pension bonus under social security law and
the granting of a war widow/war widower pension, the person is
eligible for age pension but not income support supplement.
After the granting of the war widow/ war widower pension, the
person is eligible for income support supplement but not age
pension. Under the current legislation, it is not possible to
‘transfer’ the bonus period that they accrued under the
social security law to the VEA pension bonus scheme. This is
because, under the existing provisions, a person is only able to
accrue bonus periods from the date they became eligible for a VEA
pension.

As a
result, whatever bonus periods they have accrued for age pension
under social security law are lost and they have to start accruing
again in relation to income support supplement under the
VEA.

Explanation of the Changes

These
amendments to the VEA will enable a person who was registered or
was eligible to be registered for the Pension Bonus Scheme under
social security law, and who subsequently becomes a war widow/war
widower-pensioner, to have any bonus periods they would have
accrued under the social security law in respect of age pension to
be treated as if they were bonus periods accrued under the
VEA.

Item
6 inserts a new dot point
at the end of the simplified outline in section 45T. The new
dot point provides a brief summary of new Division 12.

Item
7 adds a new Division
12 at the end of Part IIIAB. New Division 12 will modify the
application of relevant provisions in Part IIIAB so that certain
persons previously eligible for a pension bonus under social
security law, may have any bonus periods that would have accrued to
them under social security law, treated as a bonus period under the
VEA.

Division 12
- Modification of this Part in relation to certain persons
previously qualified for age pension under social security
law

45UV Persons to whom this Division
applies .

New
section 45UV specifies the criteria that a person must meet for the
new Division to apply to that person.

The
criteria are:

· a person must be a war
widow/war widower-pensioner. This term is defined in
section 5Q(1) of the VEA as:

a person who is receiving a pension under
Part II or IV at a rate determined under or by reference to
subsection 30(1); and

· a person must register as a
member of the pension bonus scheme under the VEA in respect of
income support supplement; and

· a person must
either:

· have been registered as a
member of the pension bonus scheme under Part 2.2A of the Social
Security Act 1991 with effect from a date that is earlier than
the date that the person became a war widow/war
widower-pensioner; or

· have been, in the opinion of
the Commission, eligible for registration as a member of the
pension bonus scheme under Part 2.2A of the Social Security Act
1991 (the SSA pension bonus scheme ) before the
person became a war widow/war widower-pensioner; and

· the person cannot have started
to receive age pension under the social security law;
and

· the person cannot have claimed
a pension bonus under the social security law before becoming a war
widow/war widower-pensioner.

45UW
Commission may request the provision of information

New
section 45UW provides that the Commission may request information
from a person for the purpose of determining whether the person was
registered as a member of the SSA pension bonus scheme, or whether,
in the opinion of the Commission, the person could have been
registered as a member of the SSA pension bonus scheme had the
person applied for registration of the scheme.

New
subsection 45UW also provides that the Commission may request
information from a person for the purpose of working out the bonus
periods that a person to whom this Division applies would have
accrued under the social security law if they had made a claim for
a pension bonus under that law immediately before becoming a war
widow/war widower-pensioner.

Any
request for information from the Commission must be in writing and
may specify a time period within which the person should
respond.

45UX Commission may determine whether periods
occurring before becoming a war widow/war widower-pensioner
are bonus periods under the social security law

New
section 45UX provides that the Commission may determine:

· the bonus periods that would
have resulted from a person’s period of accruing membership
under the social security; or

· if a person was not a
registered member of the scheme under the social security law, but
was eligible for membership of the scheme under the social security
law, the bonus periods that would have resulted from the period of
eligible membership under the social security law if the person had
been registered from the earliest possible date.

New
subsection 45UX(1) provides that the Commission may, subject to new
subsection (3), determine that a period of accruing membership of
the SSA pension bonus scheme would have accrued to a person as a
bonus period under social security law if the person meets the
following criteria:

· the person is a person to whom
new Division 12 applies; and

· the person was registered as a
member of the SSA pension bonus scheme; and

· had the person made a claim for
a pension bonus under the social security law immediately before
becoming a war widow/war widower- pensioner, in respect of a
period, Commission would have determined that that period or part
of that period would have been a period of accruing membership of
the SSA pension bonus scheme.

The
Commission in making this determination may have regard to
information supplied under the VEA or the social security
law.

New
subsection 45UX(2) provides that the Commission may, subject to new
subsection (3), determine that a period of accruing membership of
the SSA pension bonus scheme would have accrued to a person as a
bonus period under social security law if the person meets the
following criteria:

· the person is a person to whom
new Division 12 applies; and

· even though the person was not
registered as a member of the SSA pension bonus scheme, the person
could in the opinion of the Commission, have been registered before
becoming a war widow/war widower-pensioner had the person
applied for that registration; and

· if the person had been
registered from the earliest possible date and had the person made
a claim for a pension bonus under the social security law
immediately before becoming a war widow/war
widower-pensioner, in respect of a period, Commission would
have determined that that period or part of that period would have
been a period of accruing membership of the SSA pension bonus
scheme.

The
Commission in making this determination may have regard to
information supplied under the VEA or the social security
law.

New
subsection 45UX(3) relates to a period that Commission
determines:

· would have been a period of
accruing membership under social security law in respect of a
person who was or could have been registered under that law;
and

· would have been a part-year
period of accruing membership under that law.

If that
period was not immediately preceded by another period that would
have accrued to the person as a bonus period under the social
security law, but the person met the work test for the period, the
Commission may, despite the terms of subsection 92T(3) of the
Social Security Act 1991 , treat the part-year period as a
bonus period under the social security law.

This
provision, in conjunction with subsection 45UY(2) ensures that,
where a person has accrued only a part-year period of membership
under the social security law, that period can be included in the
calculation of the bonus under the VEA, where a minimum of one year
has been accrued.

45UY Modification of provisions of this Part in
respect of persons to whom this Division applies

New
section 45UY modifies the provisions of Part IIIAB of the VEA so
that certain persons may carry over, to the VEA Pension Bonus
Scheme, bonus periods that would have accrued to the person under
social security law had the person not become a war widow/war
widower-pensioner.

New
subsection 45UY(1) provides that, subject to subsection (2), for
the purposes of working out the amount of pension bonus payable to
a person to whom this Division applies, if the Commission
determines under section 45UX, that a period would have accrued to
a person as a bonus period under the social security law then the
bonus period is to be treated as if it were a bonus period that had
accrued to the person under the VEA.

New
subsection 45UY(1) also provides that if such a bonus period or in
the case of more than one bonus period, the last such bonus period,
is to be treated as a bonus period that accrued to the person under
this Act, then the bonus period is also to be treated as if it were
continuous with the first bonus period (if any) that accrues to the
person under the VEA after the person becomes a war widow/war
widower-pensioner.

New
subsection 45UY(2) provides that a part-year period that the
Commission determines is a bonus period that would have accrued
under the social security law to a person to whom this Division
applies may only be treated as a bonus period under the VEA and may
only be treated as continuous with any other bonus periods that the
person accrues under the VEA if:

· the bonus period is immediately
preceded by a period that the Commission determines would have been
another bonus period that accrued to the person under the social
security law; or

· the bonus period, when added to
any bonus period or bonus periods that the person accrues under the
VEA after becoming a war widow/war widower-pensioner, would
amount to at least a year.

This is
because under the requirements of the Pension Bonus Scheme under
both the social security law and the VEA a person must have at
least one bonus period before they can claim a pension bonus. If
the bonus period is a person’s last bonus period it may be
less than 12 months duration but it must be preceded by a bonus
period of at least 12 months and the person must have been an
accruing member of the scheme and have passed the work test for
that period. If it is not preceded by a bonus period of 12
months, it must, when added to a bonus period accrued under the
VEA, add up to a bonus period of at least 12 months.

New
subsection 45UY(3) relates to the application of subsection 45TR(3)
of the VEA to a part-year period that may accrue, under the VEA, to
a person to whom this Division applies. If such a part-year
period is not preceded by a bonus period accruing under this Act,
the Commission may treat the part-year period as if it was preceded
by a part-year period accrued under the VEA. However, this
will only occur if:

· the person passes the work test
for the period; and

· the person specifies the period
in the claim for pension bonus; and

· the period is the
person’s last bonus period.

This
will mean that, if the period is a period of less than twelve
months accrued since the person became a war widow/war
widow-pensioner, and is preceded by a period accrued under
the social security law that combines to at least a 12 month bonus
period, that period can be counted as a bonus period.

Item
8 provides that the
amendments to the VEA contained in this Part apply to any claim for
pension bonus made under the VEA, on or after the day on which this
Act receives the Royal Assent.

C ommencement

Clause 2
provides that items 6 to 8 commence on Royal
Assent.

Part 4 - Amendments concerning the calculation of pension
bonuses

Overview

A number of
amendments are required as a result of the amendments in Part
3. At the same time, a number of other technical amendments
are being made to ensure that the bonus paid to the person
accurately reflects the pension they were deferring and their
marital status through the period they were accruing the
bonus.

Background

A number of
different formulas are provided for the calculation of pension
bonus to cater for the various circumstances that may apply to a
person and affect the amount of their pension bonus. The
pension bonus is calculated based on the rate of the deferred
pension or pensions as at the time of grant of pension. The
types of personal circumstances that can vary include a change in
marital status and a change in pension deferred.

Explanation of the
Changes

Items 10 to
13 amend section 45UG to
provide for a circumstance where a person’s marital status
does not change, but their pension eligibility does change.
This could occur if a person is a widow/widower who has registered
as a member of the pension bonus scheme and is thus deferring
partner service pension and during their membership of the scheme
the person becomes a war widow/war widower-pensioner. As a
war widow/war widower-pensioner the person is no longer
eligible for partner service pension but is eligible for and may
defer income support supplement. Under the current
provisions, this change in pension eligibility with no change in
marital status was not suitably catered for.

Items 14 to
19 amend section
45UH. These amendments correct a number of minor errors in
the formulas and cater for the new category of persons provided for
in Part 3 of this Act; persons who are carrying over pension bonus
periods that would have accrued to them under the social security
law.

Items 20 to
26 amend section
45UI. These amendments correct a number of minor errors in
the formulas and cater for the new category of persons provided for
in Part 3 of this Act; persons who are carrying over pension bonus
periods that would have accrued to them under the social security
law.

Item
27 provides a definition
for the new term “ apportioned amount ”
which appears in new subsection 45UG(1A).

Item
28 is an application
provision.

Explanation of the
Items

Item
9 amends the definition
of pension in subsection 5Q(1) by inserting
“IIIAB” after “Parts IIIA,”.

Item
10 amends paragraphs
45UG(1)(a) and (b) by repealing the paragraphs and substituting new
paragraphs (a), (b) and (c).

New
paragraphs 45UG(1)(a), (b) and (c) provide that the formula at the
end of subsection 45UG(1) applies to a person who
either:

· was a member of couple
throughout the person’s overall qualifying period and who
remained eligible for the same pension throughout the
person’s overall qualifying period and who, if the
person is a war widow/war widower-pensioner, was a war
widow/war widower-pensioner throughout the whole of the
person’s overall qualifying period; or

· was not a member of a couple at
any time during the person’s overall qualifying period and
remained eligible for the same pension throughout the
person’s overall qualifying period and if the person is a war
widow/war widower-pensioner, the person was a war widow/war
widower-pensioner throughout the whole of the person’s
overall qualifying period.

Item
11 inserts a new
subsection 45UG(1A) after subsection 45UG(1).

New subsection
45UG(1A) provides for a new formula to apply when calculating the
pension bonus for persons who meet certain criteria. The
criteria that a person must meet to be subject to the new formula
are:

· the person was a member of a couple
throughout the person’s overall qualifying period and the
person is a war widow/war widower-pensioner but the person
was not a war widow/war widower-pensioner for some or all of
the person’s overall qualifying period; or

· the person was not a member of a
couple at any time during the person’s overall qualifying
period and the person is a war widow/war widower-pensioner
but the person was not a war widow/war widower-pensioner for
some or all of the person’s overall qualifying
period.

If a person
meets either of the above criteria then the formula at the end of
new subsection 45UG(1A) is to be used to calculate the amount of
the person’s pension bonus. The formula calculates the
pension bonus by taking the apportioned amount, times the pension
multiple, times the number of years in the person’s overall
qualifying period.

Item
14 amends the cell at
column 3 of item 1 in the table in subsection 45UH(1) by repealing
it and substituting a new cell. The new cell provides that
the annual notional single pension rate for a person who is not
permanently blind and is not a war widow/war
widower-pensioner is “the sum of the adjusted
percentage of the person’s maximum basic rate under point
SCH6-B1 and the person’s pension supplement under Module BA,
worked out, in each case, as at the date of grant of the designated
pension if it were assumed that the person were not a member of a
couple at that date”.

Item
15 amends the cell at
column 3 of item 3 in the table in subsection 45UH(1) by repealing
it and substituting a new cell. The new cell provides that
the annual notional single pension rate for a person who is a war
widow/war widower-pensioner and was a war widow/war
widower-pensioner throughout so much of the overall
qualifying period as occurred when the person was not a member of a
couple is “the person’s annual pension rate worked out
as at the date of grant of the designated
pension”.

Item
16 amends the cell at
column 2 of item 4 in the table in subsection 45UH(1) by repealing
it and substituting a new cell. The new cell provides that
for this item to apply to a person, the person must be a war
widow/war widower-pensioner, who was not a war widow/war
widower-pensioner for some or all of the overall qualifying
period occurring while the person was not a member of a
couple.

Item
17 repeals the definition
of annual pension rate in subsection 45UH(2) and
substitutes a new definition. The new definition for
“annual pension rate” provides that it is the
person’s annual pension rate, worked out as at the date of
grant of the designated pension.

Item
18 adds a note at the end
of subsection 45UH(2). The note advises that there may be
circumstances where one or other of the bracketed parts of the
formula will have a nil value.

Item
19 repeals the definition
of provisional payment rate in subsection 45UH(2) and
substitutes a new definition. The new definition provides new
provisional payment rates for persons who are carrying over bonus
periods that they would have accrued under the social security law
and new provisional payment rates for persons who are blind in
accordance with the method statements in SCH6-A1. It also
omits the references to the type of pension that a person is
granted as this is not relevant to the person’s circumstances
during the relevant part of their overall qualifying period.
Instead it details the person’s circumstances which are
relevant to that part of their overall qualifying
period.

Item
20 amends the cell at
column 3 of item 1 in the table in subsection 45UI(1) by repealing
the cell and substituting a new cell. The new cell provides
that the annual notional partnered pension rate for a person to
whom this item applies is the sum of the adjusted percentage of the
person’s maximum basic rate under point SCH6-B1 and the
person’s pension supplement under Module BA, worked out, in
each case, as at the date of grant of the designated pension if it
were assumed that the person were a member of a couple at that
date.

Item
21 amends the cell at
column 3 of item 3 in the table in subsection 45UI(1) by repealing
the cell and substituting a new cell. The new cell provides
that the annual notional partnered pension rate for a person to
whom this item applies is the person’s annual pension rate
worked out as at the date of grant of the designated
pension.

Item
22 amends the cell at
column 2 of item 4 in the table in subsection 45UI(1) by repealing
it and substituting a new cell. The new cell provides that
for this item to apply to a person, the person must be a war
widow/war widower-pensioner, who was not a war widow/war
widower- pensioner for some or all of the overall qualifying
period occurring while the person was a member of a
couple.

Item
23 amends the formula in
subsection 45UI(2) by replacing the incorrect term “annual
payment rate” in the second bracketed part of the formula
with the correct term “annual pension rate”.

Item
24 amends the definition
of annual pension rate in subsection 45UI(2) by
repealing the definition and substituting a new definition.
The new definition provides that the “annual pension
rate” is the person’s annual pension rate, worked out
as at the date of grant of the designated pension.

Item
25 adds a note to the end
of subsection 45UI(2). The note advises that there may be
circumstances where one or other of the bracketed parts of the
formula will have a nil value.

Item
26 amends the definition
of provisional payment rate in subsection 45UI(2) by
repealing the definition and substituting a new definition. The new
definition provides new provisional payment rates for persons who
are carrying over bonus periods that they would have accrued under
the social security law and new provisional payment rates for
persons who are blind in accordance with the method statements in
SCH6-A1. The new definition also omits the references to the type
of pension that a person is granted as this is not relevant to the
person’s circumstances during the relevant part of their
overall qualifying period. Instead it details the
person’s circumstances which are relevant to that part of
their overall qualifying period.

Item
27 inserts a new
section 45UIA after section 45UI. New section 45UIA provides
a formula for working out a person’s ‘apportioned
amount’ for the purposes of the formula in new subsection
45UG(1A).

The new section
also provides definitions for each of the terms used in the formula
for ‘apportioned amount’.

Item
28 provides that the
amendments in this Part of this Act apply to any claim for pension
bonus that is made under the VEA on or after the day on which this
Act receives the Royal Assent.

C ommencement

Clause 2 provides that items 9 to 28
commence on Royal Assent.

Part 5 -
Amendments
concerning the backdating of claims for partner

service pension in
certain circumstances

Overview

These changes to the Veterans'
Entitlements Act 1986 (VEA) provide for the payment of certain
partner service pensions from a date earlier than the date the
claims are lodged.

Background

A veteran with
qualifying service may make a claim for an age or invalidity
service pension. As a consequence the veteran's partner may
claim for a partner service pension. Both of these pensions
provide income support for veterans and their partners.

It is often the
inability of a disabled veteran to continue employment that
triggers these applications for income support. In many cases
the disabled veteran will also be applying for either a disability
pension or an increase in the rate of disability pension in those
instances where the veteran is already receiving a disability
pension.

The
applications are normally lodged concurrently or within a short
time of each other. Priority is given to determining the
application for service pension to ensure that the veteran has
access to income support payments as soon as possible.

The disability
pension is paid at the special rate, also referred to as the
Totally and Permanently Incapacitated (TPI) rate, in those cases
where due to the total and permanent incapacity of the veteran
resulting from war service, the veteran is unable to resume or to
continue in their employment.

The various
factors relating to the investigation of an application for the
payment of disability pension at the special rate and the pursuance
of appeal rights mean that it can take months or even years (in a
small number of cases) to resolve the claim.

If the outcome
of the claim is that the person is granted a special rate of
disability pension, then that rate of pension may, for a person
making an initial claim for a disability pension, be backdated 3
months prior to the date of lodgement of the
application.

The issue to be
addressed by the proposed amendments relates to the changes to the
partner service pension provisions made by the Veterans' Affairs
(1995-96 Budget Measures) Legislation Amendment Act 1995 .
Those amendments provide that a person will not be eligible to
receive a partner service pension unless the person has reached 50
years of age or has a dependent child when the claim is made.
However, an exception was provided where a person is the partner of
a veteran receiving a special rate of disability
pension.

The issue that
arises relates to the exception providing for the payment of a
partner service pension to the partner of a veteran who is eligible
for a disability pension at the special rate. The initial
claim for the special rate of disability pension may not be granted
for a number of reasons and therefore the claim of the partner of
the veteran for a partner service pension will be
refused.

Subsequently,
the disability pension is assessed as being payable at the special
rate with the date of effect being either the date the claim was
lodged or a date 3 months prior to the lodgement of the
application.

The
partner will then need to make a second claim for a partner service
pension but the payment of the pension can only be granted from the
date of the later claim. The current legislation does not
allow for the backdating of the second claim to the date of the
first.

Explanation of the Changes

The proposed
amendments are applicable to the partner of a veteran in the
circumstances where the veteran has had a claim for payment of the
disability pension at the special rate rejected initially but has
subsequently had the claim accepted.

The proposed
amendments provide that in the circumstances where the veteran
partner is subsequently granted a disability pension at the special
rate, the payment of a partner service pension to the partner of
the veteran may be backdated to the date that the veteran becomes
eligible for the special rate of disability pension.

The
amendments also include an amendment to provide for the disclosure
of personal information concerning the payment of the special rate
of disability pension to the partner of the veteran.

Explanation of the Items

Item 29 inserts new section 38AA to allow for the
disclosure of personal information concerning the veteran to the
partner of the veteran. New section 38AA is required because
of the operation of the Privacy Act 1988 and the limits
placed by it on the disclosure of personal information to a third
party.

New section 38AA will allow the Department of
Veterans’ Affairs to inform the partner of a veteran about
the grant of a special rate of disability pension to the veteran
for the purpose of the partner of that veteran making a claim for a
partner service pension.

Principle 11 of
the Information Privacy Principles as set out in section 14 of the
Privacy Act 1988 provides for the disclosure (at paragraph
1(d)) of personal information in those circumstances where the
disclosure “is required or authorised by or under
law”.

Item
30 inserts a reference to
new subsection 38B(3) into subsection 38B(1A). Subsection
38B(1A) currently provides, subject to subsection 38B(2), that a
person’s provisional commencement day is the day on which the
person claims the partner service pension.

The amendment
makes the provision also subject to subsection 38B(3).

Item
31 inserts new
subsection 38B(3). New subsection 38B(3) is applicable in the
circumstances where the veteran partner has become eligible for the
special rate of disability pension after the partner of the veteran
has made a claim for partner service pension.

New
subsection 38B(3) provides that where:

· a claim for partner service
pension by the partner of a veteran has been refused;
and

· that claim would not have been
refused if the veteran was receiving a special rate disability
pension; and

· the veteran has subsequently been
notified that he or she has been granted a disability pension at
the special rate; and

· the partner of the veteran
makes another claim for partner service pension within 3 months of
the notification to the veteran;

then
the provisional commencement day for the payment of partner service
pension will be the later of:

· the day that the original claim
for partner service pension was made; or

· the day that the veteran became
eligible for the special rate of disability pension.

Item
32 provides that the
amendments made by items 29, 30 and 31 are to apply to claims for
partner service pension that are lodged on or after the
commencement of the items.

C ommencement

Clause
2 provides that items 29 to 32 commence on Royal Assent.

Part 6 -
Amendments
to achieve alignment with social security law

concerning the treatment of compensation payable
in lump sums

Overview

These
amendments to the Veterans' Entitlements Act 1986 (VEA) will
align the compensation recovery provisions applicable to multiple
lump sums of compensation with those that apply under the Social
Security Act 1991 .

Background

The amendments
to the VEA made as part of the Veterans’ Affairs (1994-95
Budget Measures) Legislation Amendment Act (No. 2) 1994 aligned
the VEA with the Social Security Act 1991 (SSA) in relation
to the way in which compensation payments received by some
pensioners were treated.

The VEA had
previously provided that all periodic payments of compensation were
treated as income for the purposes of the ordinary income test
while all lump sum compensation payments were to be held as an
asset of the person.

The 1994
amendments inserted new Part IIIC into the VEA to contain the
compensation recovery provisions to mirror those found in Part 3.14
of the SSA.

Included in
Part IIIC is section 59Q which is applicable to a person who
receives a lump sum compensation payment while receiving a pension
which is subject to the compensation recovery provisions. In
those circumstances part or all of the person’s pension will
not be payable for a period known as the “lump sum preclusion
period”. The length of that period being determined by
the amount and the nature of the lump sum payment.

Subsection
59Q(5) is the equivalent of subsection 1165(3B) of the SSA as it
was at that time. The subsection provides for the calculation
of the lump sum preclusion period where a person receives
compensation in the form of two separate lump sums. The lump
sum preclusion period for the second lump sum is taken to commence
on the day after the last day of the lump sum preclusion period for
the first payment.

The
compensation recovery provisions of the VEA were not subsequently
amended to include similar amendments to those made to the SSA made
by Social Security Legislation Amendment Act (No. 1)
1995 . The amendments to section 17 of the SSA made by
that Act were intended to prevent the circumvention of the
compensation recovery provisions by the payment of compensation in
more than two lump sums.

Later
amendments to the SSA by the Family and Community Services
Legislation (Simplification and Other Measures) Act 2001
repealed the section 17 provisions relating to the payment of
multiple lump sums and included the provisions in new section 1171
as part of the rewrite of Part 3.14.

Explanation of the Changes

It is proposed to amend the relative
provisions of Part IIIC of the VEA applying to the treatment of
multiple lump sums of compensation so that they will align more
closely with the provisions that apply under the SSA following the
rewrite of Part 3.14.

As a consequence subsection 59Q(5) relating
to the receipt of two payments of lump sum compensation will be
repealed and a separate provision applicable where two or more lump
sums are received will be inserted as new section 59QA.

Explanation of the Items

Item 33 repeals subsection 59Q(5)
which provides for the calculation of the lump sum preclusion
period where a person receives compensation in the form of 2
separate lump sums.

Item 34 inserts new section 59QA. New section 59QA
provides for the determination of the deemed lump sum that arises
from two or more separate payments.

New section 59QA will be applicable
in the circumstances in which a person has received two or more
lump sum payments of compensation relating to the same event that
gave rise to an entitlement to compensation and at least one of the
payments has been made wholly or partly in respect of lost earnings
or lost capacity to earn.

In such
circumstances the person will be taken to have received a single
lump sum compensation payment equal to the sum of the multiple
payments. The single payment will be taken to have been
received by the person, on either the day on which he or she
received the last of the multiple payments or if the multiple
payments were all received on the same day, that day.

Subsection
59QA(2) provides that a payment is not to be regarded as a lump sum
payment if it relates exclusively to the payment of arrears of
periodic compensation.

Item
35 provides that the
amendments made by items 33 and 34 are to apply to multiple
compensation payments in relation to the same event if at least one
of the payments is received after the commencement of the
items.